What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Lost documents
2. Kids and too many gifts
3. Smart gift for young adult
4. Taxes: how early?
5. Online bill pay worries
6. Frugal burn-out
7. Book club?
8. How important is emergency fund?
9. Keeping car insurance
10. Reading challenging things
Right before my children started their Christmas break, we had a massive snowstorm here. The result of that snowstorm is that sledding has become a daily activity for us.
Our older children have progressed from being nearly afraid of the hill to being absolute daredevils, trying to make snow ramps and occasionally getting airborne as their sleds scream down the hill.
It’s been fun to see the children enjoy sledding so much, even if it mostly means that I spend my time watching our youngest child very carefully and helping him pull his sled back up the hill.
Afterwards, we usually make hot chocolate and/or tea and warm up by the fireplace.
Q1: Lost documents
My wife and I just refinanced our mortgage. The process took a couple months due to the fact that they lost all of the documents we signed to close the first time. The ENTIRE package of documents that includes all of our information – names, social security numbers, addresses, former addresses, bank account numbers. Basically all the information needed to steal our identities. They sent a doc-signer to us who then sent the documents by overnight courier to the escrow company. They told me it was the courier who lost them, but it could have been any of the parties in between.
I have voiced my frustration that we now must closely monitor our credit reports, bank statements, etc, and just get silence from the bank. Do we have any recourse since they lost it? Can I make them pay for a credit monitoring service? The people at the bank say “sorry” but they don’t really care since it’s not their information that’s out there somewhere!
You likely won’t be able to make them take action without a lawsuit or at least the threat of one. They have no business reason to help you figure this out at this point and, sadly, most businesses won’t take action without a business reason.
Your recourse depends on the consumer protection laws in your state, and the best way to investigate that in this situation is to contact a lawyer who deals in such issues. If you have a family lawyer, start there.
You made the right move by keeping a careful eye on your credit, by the way. Most likely, your papers are in a filing cabinet somewhere, but it’s hard to tell.
Q2: Kids and too many gifts
My husband and I felt that we gave our children appropriate gifts this year. We gave each of our three children three nice presents each that they loved. We want to keep the number low as to avoid materialism and spoiling.
The problem comes with extended relatives. Each of our parents gave the kids two or three gifts each. Their aunts and uncles each delivered a present or two. Before we knew it, our kids have a dozen and a half gifts each. They have items that they haven’t even touched yet.
This seems like overkill. What can we do next year to prevent this?
We’re somewhat in a similar boat. Our children have two sets of grandparents, four sets of aunts and uncles, and some great aunts and cousins and friends that give them gifts at Christmas. It feels like overload.
Our solution is to talk to our kids about it. We try to make it very clear that Christmas is a special time of the year where people give gifts to show that they care, but this is not how normal life is.
Although being reasonable about Christmas in your own home is a strong step, the truly important part of the equation is to be financially sensible throughout the year so that your children have a good grasp on “normal.”
Q3: Smart gift for young adult
I need a gift for my 21 year old brother. I always try to buy gifts that keep on giving (i.e., something that will make someone’s life easier or save them money; e.g., energy saving power strip, foam hand soap dispenser, magazine subscription). I’ve been stewing about what to get him. What for $25 could enhance the life he has now and into the future? He still lives at home with my parents and at the rate he’s going it doesn’t look like he’ll be moving out anytime soon. He has everything he wants because he has almost no living expenses. I fear that he’s too comfortable at home not having any real expenses, and that when he eventually wants more independence he won’t be prepared for the cost. So I was looking for an easy tool to help him learn to budget, save for the future, and think about retirement (since time is on his side). Any suggestions?
There are a lot of gifts you can give him, but they all require that he take some action himself. Without that self-initiative, nothing is going to happen.
If I were you, I would pair a “gift that keeps on giving” with a personal finance book – say, Your Money or Your Life. The key is to have that book in his hands for the moment he decides he needs to wake up and take charge of things.
You can even tell him that the book is there for the time he decides he needs to take charge of his life. It might not be today. It might not be this year. Someday, though, his life will change, and that book will be there for him on that day.
I’d suggest filing them as soon as you have all of the data you need to make it work. That way, the task is out of the way and in the government’s hands.
If you’re finding that you have to pay a significant amount (self-employed people often do), filing closer to the deadline might make more sense, as it leaves the money in your accounts for longer (and potentially earning interest).
Still, there’s no reason not to fire up TurboTax and get to work on your taxes now, even if you decide not to actually file for a while.
Q5: Online bill pay worries
Online bill paying is great, for all the reasons you cite — IF! IF the payer him- or herself initiates the transaction! All businesses want their customers to “go green” and to eliminate paper bills, thus saving them money, to be sure. But I for one do not want businesses to have direct access to my checking account! Why would I?
If a bill is due, I will pay it. I will access my account. Why would anyone be willing to give account access to a third party? That seems like asking for trouble. Yes, maybe the possibility of trouble is remote. But I know a way to make that remote possibility an impossibility.
I agree with you that when companies can just withdraw out of your account, it comes with risk. Companies have been known to make errors or abuse that privilege in the past, particularly smaller companies that do not use strong accounting practices.
For payments that are of a standard amount, like your mortgage, you can set up the payment to be automatic without the other party ever touching your account, at least with most online bill pay services. I do this all the time for regular bills, such as insurance.
I consider the risk of a company misusing the account info to be roughly the same as the risk of writing a check, as a check shares the same information and both occur due to clerical error.
Q6: Frugal burn-out
I was wondering how you deal with or if you have ever experienced frugal burn out. While most days I enjoy making things from scratch, searching on Craiglist for deals and walking instead of driving, sometimes it all gets to be a little too much and at times stressful. Sometimes I don’t have the wherewithall to go to the three different grocery stores in my price book or if I’m out of bread I don’t have gumption to get up and make it as well as a batch of homemade yogurt and apple butter. When these moments occur I’m seized with extreme guilt and stress at the money I’m wasting if I don’t get it done. What are your thoughts?
That’s why I usually have meals frozen in the freezer and I have a “default” grocery store to go to if I need staples.
Much like you, there are days where I’m incredibly productive. There are other days where I’m not nearly so productive (like today, actually). I try very hard to have established patterns in place and things prepared so that on the non-productive days, things don’t fall apart.
You shouldn’t feel guilty about having lower-energy days. Everyone does – at least, everyone I know does.
I will probably be doing a number of one-shot posts where I discuss interesting things I find in personal finance books.
I still read books on personal finance and personal growth, but I was getting pretty burnt out reading one a week, so now that the pace has slowed down, I’m actually enjoying them more.
If I find a book that just resonates with me deeply, I may do another “book club” series focusing on it, but I haven’t found one that’s been a home run like that yet.
Q8: How important is emergency fund?
So far, I’ve been using the snowball method to pay down debt: I had $2500 on a credit card with something ridiculous like 20 percent interest. I paid that off last summer. I have two students loans that I’ve consolidated into one, $25,000 loan at 6.5 percent interest. I have a $1,000 emergency fund.
The loan’s minimum payment is $206. I’ve been paying at least $306 each month. At this rate, it will still take close to ten years to pay off my student loan. Should I stop paying that extra $100 (for now) and put that money into my emergency fund/3-6 month living expenses? My boyfriend and I would like to buy a house in the next year or two — should I focus on saving for that instead of the loan?
For what it’s worth, I work for a newspaper (making about $29k), which isn’t the most stable industry.
Given your industry and your plans, I would probably build the emergency fund.
I don’t view any job in the newspaper business right now as a stable job, and if your job isn’t stable, you need cash in the bank above all else. Although the extra debt payment will help in the long run, the cash in hand can avert a complete disaster in the short run.
I would just keep the money in a savings account, as you’ll want easy access to it and you also don’t want the risk of losing any of the balance.
Q9: Keeping car insurance
My family is in the process of moving overseas for a few years. We’ve heard that we should keep car insurance in the US even if we won’t be using it since otherwise we will pay higher rates when we return. Do you know if this is true or not?
Your rates probably will be a bit higher when you return if you don’t have insurance for a few years. The question is how much higher, and whether it’s worth the cost of maintaining insurance you won’t use.
It’s very hard to come up with a definitive answer here because the specifics are unclear. I don’t know (and probably you don’t know) how long you’ll be abroad (the longer it is, the more I’d lean toward cancelling for now), what your driving history is (the worse it is, the more I’d lean towards cancelling for now), the ages of your family members, and what you’re paying at the moment.
If you are dead sure you’ll be back in two or three years, then I’d probably keep it. If you think there’s a good chance it will be three years or more, I’d probably lean towards cancelling. That’s just a gut feeling, though.
Q10: Reading challenging things
This year, I’ve decided based on your suggestions to try to read more challenging things. I’m starting with Bertrand Russell’s History of Western Philosophy. Do you have any ideas or suggestions on how to maximize challenging reading for my own improvement?
Read it slow – a few pages or a small section at a time. If you have any questions at all, such as who a person is that’s being referenced or what a word means, stop and look it up. After you’re done reading, think over what you’ve read. Try to think about the ideas in your own words and tie it to the things you’ve observed or felt.
It might take you three months to read a challenging book at that rate, but at the end, you’ll really understand that book. It will mean something and it will be a part of your thinking and shape your thinking for the rest of your life.
I often have one “challenging” book going at a time, and I supplement it with a lighter book and shorter articles that I read at the same time.
Got any questions? The best way to ask is to email me – trent at thesimpledollar dot com. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.